Industrea 2011 Online Annual Report

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China Market Dynamics

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Our China footprint

	Industrea first established a presence in China in 2005 following the acquisition of Wadam Industries which had been operating in China since 1995. Today it operates via wholly owned foreign enterprises established in Beijing and a dedicated diesel equipment manufacturing and product support facility in Shijiazhuang.
	Over the past three financial years Industrea sales pipeline into China has swelled significantly, with over $130million in diesel equipment and $95million of gas drainage and directional drilling products contracted to Chinese coal mining companies.
	As at 30 June 2011,over 140 Industrea mining vehicles and over 60 gas drainage and directional guidance drilling systems were in place at over 50 coal mines throughout China and Mongolia.
	As a result of these product sales and the tenure and strength of our Chinese customer relationships, annuity revenue from servicing, spares sales and maintenance have increased by more than 85% over the past three years, a trend that will continue to accelerate as more contracts are won and our customer base continues to broaden.
	Industrea has established deep relationships with many of China's largest coal miners, including China Shenua Energy Company, Jincheng Anthracite Mining Group and Shanxi Asian American Daning Co.

Why our footprint will continue to expand

	Approximately 97% of China's mammoth coal reserves are underground requiring highly specialised longwall equipment and gas drainage tools, product categories in which Industrea has category-leading offerings
	Our products and technology are intrinsically aligned with China's five year plans to dramatically increase coal production, mechanisation, efficiency and safety. Under China's 12th plan for 2011 to 2015, key, government mandated priorities are to: - target annual coal output of 3.6 – 3.8 billion tonnes by 2015, up from 3.1 billion tonnes in 2009, representing 44% of global coal production - target creation of 10 new large mining companies (capacity greater than 100 mtpa) – compared to Australia’s total coal output of approximately 360 mtpa - increase coal mine mechanisation rate to 75% - reduce number of coal mining companies to 4,000
	China’s demand for coal production is fuelled by its world leading economic growth (June 2011 quarter growth still registered at a robust 9.7%), which in turn is dependent on: - power generation (71% of power needs supplied by coal) - steel production - construction materials
	This rapid expansion of coal production is forecast to increase demand for mining equipment in China by 22% p.a. to 150 Rmb billion by 2015, which Industrea remains strategically positioned to help meet.